WaterSmart Software, a small startup in San Francisco, is working with local water districts in California and other states to transform water meter data into easy-to-understand home water reports that are mailed directly to homeowners or made accessible via the Web and mobile devices. And given the state's ongoing drought, it's a good time to be in the business of promoting water conservation.

The company's clients include the cities of Palo Alto, Cotati and Sacramento, the Soquel Creek Water District, and the East Bay Municipal Utility District, or EBMUD. WaterSmart helps households compare their water use to neighborhood averages, which has proved effective at driving conservation and savings. WaterSmart has been described as Opower, but for water; Opower is the software-as-a-service company for the electric utility industry that celebrated its $116 million IPO earlier this year. The Mercury News recently sat down with Peter Yolles, WaterSmart's founder and CEO, in the company's San Francisco office; the interview has been edited for length and clarity.

Q: How did you become a water guy?

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A: I've always been fascinated politically by the question of who gets how much water and why. I like the people in water; they are really dedicated. I worked for a number of environmental groups like the Pacific Institute. I went on to do water studies at Yale and did project finance at GE Capital, also in water. And then I came back to California and did water rights trading, where we were marketing water from agricultural districts and selling it.

Then I spent seven years at the Nature Conservancy overseeing river restoration in California, so this idea for WaterSmart came from this larger idea of "How do you advance sustainable water management?"

Q: Has Opower's success helped you tell your story? Does being the Opower of water help you?

A: The phrase Opower for water was actually coined by one of our early investors. In Silicon Valley, if you see a successful business model, you latch on to that. It certainly made it an easier story. Opower raised a lot of money and it was easy to get people on board with the concept. But water is a different industry than electricity. There's very little overlap between utilities that manage gas and electricity and utilities that manage water. It's a different mind set, and different people.

Q: In electricity, there are three big utilities in California. If you have PG&E as a client, you basically have access to millions of customers and most of Northern California. As WaterSmart pursues new business, how do you crack the sheer volume of small water districts that are out there?

A: The water industry is very fragmented, and water is largely a local resource. So we try to find progressive leaders in the region who can lead the way. In the Bay Area, we found a real champion in Richard Harris, the conservation director at East Bay MUD. He's been wanting to do something like this for a decade. We started with a pilot project, and now we're expanding to 100,000 homes.

Q: What drives behavior change around water conservation the most? Is it comparing to neighbors or tips on what you can do to become more water efficient?

A: It's really social comparisons. We're all social animals. Behavior change is the right way to communicate about resource efficiency. If you ask people what motivates them, they would never say it's because of the people around me, but that's really what it is. You can talk about drought, or rivers drying up and fish dying, but what people care about is themselves. The home water report is all about them.

Q: What's the national market for your company? Is it just the drought states of the West?

A: The drought states are our core, but 36 states are in some form of water stress. Every state is a potential place for WaterSmart to do business.

Q: Do you think that water is finally grabbing the attention of the venture capital and technology community?

A: I've never seen people talking about water more than they do today. I hear about it on MUNI and when I'm standing in line at the grocery store -- people are talking about water all the time. Climate change is the issue of our time, and the hydrologic cycle is how climate change manifests itself: We see more deluges and floods and droughts and sea level rise. Water is rising in our consciousness.

Title: Founder and CEO, WaterSmart SoftwarePrevious jobs: A principal at Water Insight; project director at the Nature Conservancy; vice president of the Western Water Co.Education: Master's degree in water resource management and MBA, Yale; bachelor's degree, University of Colorado-BoulderResidence: BelvedereFamily: Married; son, 11, and daughter, 10Age: 46

Five things about Peter Yolles

1. He gets his water from the Marin Municipal Water District; the water district is now a WaterSmart customer. 2. Hobbies revolve around being outdoors and begin with the letter S: sailing, swimming, skiing, soccer. Also likes to cook.3. Grew up sailing on San Francisco Bay with his father, who kept his sailboat at Coyote Point, and has a 24-foot sloop, docked in Belvedere.4. He took a six-month sailing trip from San Francisco to Tahiti when he was 22, signing on as first mate with an Australian captain who was making his way home. 5. Tracked his household's water use with an Excel spreadsheet for 10 years.